Review: “11 Trends in Philanthropy for 2023”

The Dorothy A. Johnson Center for Philanthropy at Grand Valley State University released a report in January titled “11 Trends in Philanthropy for 2023.” It’s a thoughtful and generally balanced piece that explores many of the changes in philanthropy we have seen over the past few years, including those spurred by the pandemic and racial unrest. Some of these trends have been noted elsewhere, but others will likely be less familiar to institutional and individual donors. And the report’s authors are clear that the identified trends are far from universal, noting, “Each nonprofit, foundation, donor, community or network is affected differently by our national and global zeitgeist.”

1. The Rise of Collaborative Funding – This is certainly not a new development. Philanthropy Roundtable’s guidebook, “Protecting Your Legacy,” discusses philanthropic partnerships such as the Charter School Growth Fund, Blue Meridien and the Robin Hood Foundation. And many place-based funders – particularly those who serve communities with limited philanthropic assets – have engaged in collaborative funding on a regular basis. The pandemic, however, did increase the use of collaborative funding, much of it initiated by community foundations. In addition, philanthropic partnerships are increasingly attracting some of our largest foundations. The report mentions The Audacious Project, for example. In another instance, Open Philanthropy, an LLC founded by Dustin Moskovitz and Cari Tuna, recently re-granted $150 million to other grantmakers, including $70 million to the Gates Foundation, to amplify global development programs already in operation. Given existing concerns about the outsized influence of so-called “Big Philanthropy,” it’s reasonable to ask if collaborative funding on an even larger scale bodes well or ill for public perceptions of philanthropy.
2. Rethinking What Capacity Building Should Be — and Who Should Decide – Capacity building has many dimensions, and this discussion is disappointing in its almost immediate focus on race: “… traditional, foundation-funded capacity building is increasingly criticized for its origins in white dominant culture and its continued practice of serving white-led nonprofits.” Should funders unilaterally impose their perceptions of “what nonprofits need” on their grantees? Of course not. But funders who work closely with grantees over time can recognize weaknesses in an organization’s board of directors, financial systems, fundraising practices and other key elements critical to success. The suggestion that “funders and grantees intentionally co-create solutions in capacity building” is a good one, as is recommending that funders consider general operating support and multi-year funding for organizations with significant capacity needs. These are both excellent practices to improve any nonprofit’s effectiveness.
3. Disaster Philanthropy Is Transitioning for the Long Haul – Again, this is not a new conversation. Disaster philanthropy in the wake of both Hurricane Katrina and the 9/11 attacks tended to be present-oriented despite reminders that resources would also be needed for long-term recovery and rebuilding. But with each major disaster, the Johnson Center report notes, “Key actors — like the Center for Disaster Philanthropy (CDP) and many community foundations — are helping to drive the understanding that emergency response alone is unequal to the threat posed by recurring disasters.” Supporting education about preparedness is one approach. Building resilience and local leadership in communities likely to face greater hardships from disasters is another. But while such efforts are increasing, preparedness and resilience-building funding still lags far behind “the initial humanitarian response,” a conclusion supported by a recent article in The Chronicle of Philanthropy.
4. For-Profit News Outlets are Exploring Nonprofit Models – This trend began as a response to the decline in local news reporting, resulting in the start-up of over 200 nonprofit news outlets since 2012. The trend is accelerating with the conversion of a few for-profit outlets (including The Chronicle of Philanthropy) into independent nonprofits. Some outlets are retaining their for-profit status but are owned by nonprofit entities. Examples include National Review and The Philadelphia Enquirer. In another model, for-profit outlets are seeking philanthropic support for special projects. The Ford Foundation, Stavros Niarchos Foundation and the William and Flora Hewlett Foundation have collectively committed $4 million to support the Headway Initiative at The New York Times, while the Associated Press has been awarded $8 million for its climate coverage. The Johnson Center report expresses some concerns about these evolving relationships but focuses primarily on funding restrictions that may keep news outlets from receiving adequate support to sustain operations. Although the report states that “A free and independent press is widely acknowledged to be a critical pillar of a functioning democracy,” it does not ask hard questions about the potential influence of private funding on news outlets’ decisions on what news will be delivered and how it will be presented to their readers.
5. New Organizational Structure Models are Toppling the Staff Pyramid – Regarding this trend the report notes, “Today, nonprofits are increasingly embracing non-traditional structures such as co-leadership, co- or multi-executive directorship, worker self-direction and fiscal sponsorship as opportunities to create more sustainable and mission-driven programs.” It is true that lone executive directors of many small – and even medium-size – nonprofits are frequently burdened with multiple responsibilities that can lead to burnout. And it is not surprising that as younger generations enter the nonprofit sector, they adopt teamwork as a workplace practice. Much of their education and likely all their professional experiences have prepared them for shared leadership. It is too soon to assess the success of this evolution and its impact on nonprofit accountability, but those questions will need to be asked.
6. Policymakers Are Paying Increasing Attention to Moving More Money Faster – The report is correct in stating, “Across the last 10-15 years, we’ve seen increased attention to foundation payout rates, the declining number of individual donors and the growth of donor-advised funds (DAFs).” Yet the Accelerating Charitable Efforts (ACE) Act did not make it out of the 117th Congress and failed to gain significant bipartisan support. The philanthropic sector should anticipate continued efforts to limit philanthropic freedom with misguided mandates on both the state and federal levels, but even this report concludes that “The proper policy response to those calls and the mechanics of those changes — and their unintended follow-on consequences — remain very unclear.”
7. ESG Backlash Will Affect the Future of Philanthropy and Impact Investing – The report acknowledges that impact investing focused on ESG (environmental, social and governance) has come under attack from both the Left and the Right but focuses primarily on the latter. It concludes, “This rapidly intensifying backlash against ESG considerations will affect philanthropy more and more as impact investing by philanthropic institutions continues to grow — as most expect it will — and as younger donor-investors continue to use both their giving and their investing as integrated tools for social change.” As evidence, the report points to Philanthropy Roundtable’s keynote conversation on this topic at the 2022 Annual Meeting, “ESG: An Insidious Threat to Free Society and Philanthropy.”
8. Will Philanthropy Stay Focused on Racial Equity? – Although total grantmaking for racial equity has increased significantly since 2020, the report asks two questions. The first is whether those numbers are skewed by a few major donors. The second is “How much of this [giving] represents real change and responsiveness to entrenched and emerging needs, versus wanting to be seen as responsive and connected to community — to be part of a trend?” We do continue to see news stories about increased grantmaking in this area, including a $1 million spend-out gift from the Lillian Holofcener Charitable Foundation to support a free newspaper in Baltimore staffed by Black writers and focused on the city’s Black residents, and a call from several of the nation’s largest foundations for gifts to the Black Feminist Fund, whose goal is to raise $100 million to support nonprofits led by Black women. Nonetheless, the report concludes that currently there is no clear answer.
9. More Nonprofit Employees Are Moving to Unionize – Citing an August 2022 Gallup poll that claims, “Seventy-one percent of Americans now approve of labor unions,” the report discusses the growing interest in unionization in nonprofit organizations. The Chronicle of Philanthropy also reported on this trend recently in an article that focused on the successful unionization effort at the Southern Poverty Law Center. The reasons behind the rise in nonprofit unions are both internal and external. Increased caseloads during and after the pandemic caused frontline workers to experience more stress and burnout and have resulted in demands for higher wages and enhanced benefits. In some cases, staff at charitable organizations see unionization as a way to achieve social goals like diversity, equity and inclusion policies and racial equity. But unions have also become more aggressive in courting these workers, and the Nonprofit Professional Employees Union grew its membership from 250 members in 2018 to 1,500 members representing nearly 50 organizations in 2022. It is not yet clear, however, if adequate funding – whether from private philanthropy or government grants – will follow to support the increased costs of nonprofit unionization.
10. IRS Delays and Other Barriers to Data Mean Real Risks for Nonprofits – Mandatory electronic filing of all 990 tax forms after July 19 has made every field on those forms accessible electronically. The pandemic, however, has caused considerable delays in the IRS release of this data. The Johnson Center report notes, “In September 2022, Candid reported that for 990s filed for tax year 2019 and later, the processing delay for most organizations is now well over 36 months.” Other data concerns include the lack of information about communities and populations served by specific nonprofits and the dependence on private giving at most organizations that track philanthropic data. The report does not ask how much transparency should reasonably be mandated of 501(c)(3) organizations, nor does it question whether nonprofit data-gathering should be handled by an agency of the federal government.
11. The Public Is Holding Nonprofits Accountable to Living Their Mission and Values – This last trend is directly related to No. 10, as the heightened transparency of nonprofit operations via electronic access to their tax filings has made it easier to identify fraudulent transactions. Beyond financial misdeeds, however, there are increased demands for nonprofits to live up to their missions and stated values. The Johnson Center report concludes, “As more nonprofits and foundations open up their operations to all their stakeholders — embracing greater inclusion, strategies like participatory grantmaking, or changing how they monitor and evaluate their programs — more people will come to expect and wield opportunities for accountability.” What the report fails to discuss, however, are instances where this trend has produced questionable results, particularly in cultural organizations. The resignation of Warren Kanders from the board of the Whitney Museum of American Art is only one of a number of examples of “accountability” running amok.